Correlation Between Assured Guaranty and Fidelity National

Can any of the company-specific risk be diversified away by investing in both Assured Guaranty and Fidelity National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Assured Guaranty and Fidelity National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Assured Guaranty and Fidelity National Financial, you can compare the effects of market volatilities on Assured Guaranty and Fidelity National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Assured Guaranty with a short position of Fidelity National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assured Guaranty and Fidelity National.

Diversification Opportunities for Assured Guaranty and Fidelity National

-0.39

Correlation Coefficient

Assured Guaranty  Fidelity National

Very good diversification

The 3 months correlation between Assured and Fidelity is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and Fidelity National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National and Assured Guaranty is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Assured Guaranty are associated (or correlated) with Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and Fidelity National go up and down completely randomly.

Pair Corralation between Assured Guaranty and Fidelity National

Considering the 90-day investment horizon Assured Guaranty is expected to generate 34.12 times less return on investment than Fidelity National. In addition to that, Assured Guaranty is 1.09 times more volatile than Fidelity National Financial. It trades about 0.01 of its total potential returns per unit of risk. Fidelity National Financial is currently generating about 0.19 per unit of volatility. If you would invest  5,565  in Fidelity National Financial on December 29, 2024 and sell it today you would earn a total of  928.00  from holding Fidelity National Financial or generate 16.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Assured Guaranty  vs.  Fidelity National Financial

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Assured Guaranty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fidelity National

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fidelity National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Assured Guaranty and Fidelity National

The main advantage of trading using opposite Assured Guaranty and Fidelity National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assured Guaranty position performs unexpectedly, Fidelity National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity National will offset losses from the drop in Fidelity National's long position.

The idea behind Assured Guaranty and Fidelity National Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.